$EURUSD ——The Weak Euro Amid the Policy Gap Between the US and Europe

Currently, EURUSD is trading around 1.0720, nearly 7% below the high point at the beginning of the year, and approaching the low point within 2026. The key driver remains the pronounced divergence in monetary policy between the US and Europe: the Federal Reserve has fully reversed expectations for rate cuts this year due to persistently high inflation (April CPI year-on-year 3.8%) and oil prices breaking above $100, with the probability of rate hikes by year-end already exceeding 50%; meanwhile, the European Central Bank, despite facing imported inflation pressure, is contending with a weak Eurozone economy (Germany’s April PMI has been below 45 for two consecutive months). The market broadly expects the ECB to only raise rates by 25 basis points in June to 1.25%, and it may pause before the end of the year. US Treasury yields have surged (10-year at 4.60%), and the spread between German and US bond yields has widened to 210 basis points, further weighing on the euro.

In addition, the Middle East situation is pushing up energy costs, worsening trade conditions for the Eurozone. Concerns about fiscal deficits in countries such as France and Italy are also suppressing euro confidence. In the short term, if the Fed—led by Wotsh—continues to release hawkish signals, EURUSD may test the key support at 1.06. A rebound would depend on the ECB raising rates more than expected or a significant cooling of geopolitical risks, but the probability is low. Overall, the outlook remains that the euro is weak. #TradFi交易分享挑战